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Distressed homes pull prices down, recovery not likely to be in 2012

Distressed homes pulling prices down

According to the Campbell/Inside Mortgage Finance survey, half of all homes sold in November were either short sales or REOs with most selling at a discount compared to typical resale homes or new homes with the average price averaging $209,000 in November compared to non-distressed homes which averaged $259,000.

Isolating REO properties in move-in condition, the average price was $190,000 for the month while damaged REOs fetched an average of $99,000.

According to a recent Lender Processing Services (LPS) report, the total number of properties that are 30 or more days past due, but not in foreclosure is 4,144,000 with nearly half at least 90 days delinquent but still not in foreclosure. Additionally, LPS reports that there are 2,116,000 properties in foreclosure pre-sale inventory. Overall, there is a total of 6,260,000 properties that are 30 or more days delinquent or in foreclosure. Many of these homes will be sold as short sales or eventually REO listings.

Distressed properties are believed by most to be the reason home prices will not make a major comeback in 2012 or even 2013, and Trulia’s Chief Economist, Dr. Jed Kolko told AGBeat that in 2012, he is hopeful that there will be a resolution to the robosigning scandal and rampant mortgage fraud that the 50 attorneys generals and various federal agencies investigated in 2010 but came to no unified conclusion as to how to enforce legal action against illegal foreclosures perpetrated by banks. “We are likely to see very soon what agreements the attorneys generals will have,” he said, noting that the sooner this happens, the better it is as our nation is suffering from a robosigning hangover.

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The down side to resolution of the robosigning debacle is that the natural foreclosures that have been in limbo and not evicted will likely hit the market, causing a spike in foreclosures in 2012 which although it will hurt consumer confidence, Kolko says the move is necessary.

Tara Steele is the News Director at The American Genius, covering entrepreneur, real estate, technology news and everything in between. If you'd like to reach Tara with a question, comment, press release or hot news tip, simply click the link below.

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